© OECD/IEA 2015 © OECD/IEA 2015

Scaling-up Renewables: Critical Success Factors

Dr. Paolo Frankl Head Renewable Energy Division

International Energy Agency

WBCSD RE LCPTis, COP-21, Paris, 4 December 2015

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INDCs very good first step but not enough

Global energy-related GHG emissions

Five measures to achieve a peak in emissions around 2020; investment in renewables to reach $ 400 bn/y by 2030

20

25

30

35

40

2000 2014 2020 2025 2030

Gt C

O2-

eq

Bridge Scenario

INDC Scenario Energy

efficiency

49%

Reducing inefficient coal

Renewables investment

Upstream methane reductions

Fossil-fuel subsidy reform

17%

15%

10%

Savings by measure, 2030

9%

© OECD/IEA 2015

Innovation critical to stay below 2°C

Global energy-related GHG emissions by scenario

By 2040, renewables should generate more than half global electricity in the 450 Scenario, with investments reaching $470 bn per year

Five key actions with existing technologies

Innovation to support accelerated transition

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Power mix: towards a shift reversal

Evolution of the global power capacities in the 450 Scenario

Renewables should account for over 50% of global electricity generation by 2040

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The share of renewables in net additions to power capacity continues to rise with non-hydro sources reaching nearly half of the total

Renewables becoming the largest source of new power capacity

World net additions to power capacity

Analysis from the IEA Medium-Term Renewable Energy Market Report 2015 and the New Policies Scenario of the World Energy Outlook 2015.

0

200

400

600

800

1 000

1 200

1 400

1 600

2008-2014 2014-20

GW

Fossil fuels Nuclear Hydropower Non-hydro renewables

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Wind and solar PV reach new lows

Price competition, long-term contracts, good resources and financial de-risking measures create lower-cost deployment opportunities in newer markets

Long-term contract prices for new renewable power to be commissioned in 2016-2019

Utility-scale solar PV Onshore wind

Chile USD 65-70/MWh

Brazil USD 81/MWh

United States USD 65-70/MWh

India USD 88-116/MWh

United Arab Emirates USD 58/MWh

South Africa USD 65/MWh

United States USD 47/MWh

Brazil USD 49/MWh

South Africa USD 51/MWh Australia

USD 69/MWh

Turkey USD 73/MWh

China USD 80–91/MWh

Germany USD 67-100/MWh

Egypt USD 41-50/MWh

Jordan USD 61-77/MWh

Uruguay USD 90/MWh

Germany USD 96 /MWh

Canada USD 66/MWh

This map is without prejudice to the status or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area

© OECD/IEA 2015

0

200

400

600

800

1 000

1 200

1 400

1 600

Capacity growth Capacity growth New investment New investment

2008-14 2014-20 2008-14 2014-20

GW / U

SD 2

014

billio

n

Ocean Geothermal STE Solar PV Offshore wind Onshore wind Bioenergy Hydropower

More renewables for less money But how much is needed?

Wind and solar PV comprise two thirds, or USD 900 billion, of new investment needs to 2020 and capacity increases are being made at lower cost than in the past

Renewable power capacity – net additions versus new investment

USD 2014 GW

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Enhanced policies can get RE growth back on track to meet climate goals

Policy enhancements can accelerate renewables growth by 25% vs. the main case and increase annual investment to over USD 315 billion by 2020

World renewable power annual capacity additions, main vs. accelerated case

0 20 40 60 80

100 120 140 160 180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

United States Japan EU-28 Other OECD India China Brazil Other non-OECD

Historical Forecast

0

20

40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

United States Japan EU-28 Other OECD India China Brazil Other non-OECD Main case

Historical Accelerated case

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VRE share of total annual electricity output

Source: IEA estimates derived in part from IEA Medium-Term Renewable Energy Market Report 2015.

Towards high shares of variable renewables

Share of variable electricity generation in 2014 and 2020

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2. Make better use of what

you have

Operations

1. Let wind and solar play their

part

3. Take a system wide-strategic approach

to investments!

System friendly

VRE

Technology spread

Geographic spread

Design of power

plants

Three pillars of system transformation Investm

ents

More flexible systems increase both diversification and resilience increase energy security

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High Capex: Cost of Capital matters

Market and regulatory risks can increase weighted average cost of capital and undermine competitiveness of PV and Wind power

Impact of weighted average cost of capital on the levelised cost of solar PV

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Policy implications: Enabling environment is crucial

Providing financial support

Cost reduction through • Technology

development • Scale up • Learning

before 2013

Enabling policy and market framework which allows low cost financing

and generation

• Competition • Predictable long-term

income streams • Short-term market value

signals • Portfolio development • System Integration

Cost reduction through • Technology innovation • Financial innovation • New markets with best resources

2014-2020

Main Policy

Key Characteristics

Cost reduction

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Reserve slides

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A decisive moment for the future of renewables Increasingly affordable renewables are set to dominate the growing

power systems of the world. The effect of the lower oil price environment on global renewable growth

is more perception than reality, though biofuels and heat sectors are exceptions in some circumstances.

Yet, wavering policy commitments risk undermining investor confidence and are dampening growth

Further policy action is needed for heat and biofuel sectors, in the face of structural challenges.

While variability of renewables is a challenge energy systems can learn to

adapt to, variability of policies poses a far greater risk.

© OECD/IEA 2015

As the OECD slows, non-OECD countries account for two-thirds of renewable growth, driven by fast-growing power demand, diversification needs and local pollution concerns

Growth shifting to emerging markets and developing countries

Shares of net additional renewable power capacity, 2014-20

EU 13%

USA 9%

Japan 5%

Rest OECD 8%

China 38%

India 9%

Brazil 5%

Rest non - OECD 13%

© OECD/IEA 2015

0

50

100

150

200

250

300

2006 2008 2010 2012 2014 2016 2018 2020

USD

2014

/MWh

Brazil PPA Egypt PPA US PPA South Africa Round 4

How quickly can RE costs converge towards best world benchmarks?

Typical onshore wind levelised costs of electricity generation (2006-2020)

Medium-Term Benchmark cost 60-80$/MWh

Great difference in generation costs persist due to different system prices and cost of financing